In 1994, US-based building-control systems specialist ECG US created a joint venture with China-based CIG Ltd, Realton JV, in order to manufacture and sell building-control system products, such as air-conditioning valves and fire-safety equipment, on the mainland. The joint venture was out of control from the beginning. Sales were weak and, unbeknown to ECG US, the joint venture used complex maneuvers in order to gain contracts. With Realton unable to generate a profit, ECG US decided to dissolve the venture altogether by 2001. Nonetheless, the Chinese partner was adamant about continuing its operation, maintaining that Realton was profitable by Chinese accounting standards. As the two parties enter into negotiation, how can they find a solution to this quagmire and protect their interests at the same time?

Functional Area :

Accounting & ControlNegotiation Strategy

Learning Objective:

The teaching objectives of the case are:1.To alert students to the risks of fraud and the importance of internal control systems. 2.To provide students with a basic understanding of the complexity and risks associated with running and liquidating a joint venture in a different jurisdiction. 3.To provide students with an opportunity to explore business negotiation.